Theoretical expectations
This article builds on two empirical findings in the literature. First, there is some evidence that regulating medical doctors’ admissions limits the number of providers [23–26]. Second, the paper harks back to research on cost containment in healthcare which has been prolix on the lack of impact of provider regulations on healthcare costs. A recent literature review on the topic summarizes different measures used by governments to keep healthcare costs under control. Therein, the authors do not find evidence for effectiveness regarding 21 out of 41 containment policies. “Policies most often evaluated were payment reforms (10 studies), managed care (8 studies) and cost sharing (6 studies)” [27, p. 71]. Further, they do not report evidence that regulations limiting the number of healthcare providers contribute to cost containment. Another study by the OECD also suggests that measures, “restricting the supply of health professionals have proven ineffective in containing overall health expenditures”; notably, limiting the number of providers reduces competition and increases spending [10, pp. 4-5].
According to the literature, there are different explanations for why regulating the admission of doctors might impact health expenditures, or, in other words, why the density of healthcare providers affects health costs [28–30]. One prominent explanation for this logic is called supplier-induced demand. According to this theory, healthcare providers with an independent business have – under certain conditions – an incentive to augment the number of services they provide as they exploit patients’ dependence on providers’ advice for choosing whether they should buy healthcare services [2–5]. Because of the increase in their own ranks and thus competition, physicians will assume a decrease in patient demand. Supplier-induced demand postulates that physicians will exploit the conflict of interest between their roles as agents of the patient and business owners, and inform patients in a way that leads them to consuming more healthcare services than necessary. Nevertheless, in order for this argument to hold, all patients need to be fully insured and fees for healthcare services are endogenously fixed [31]. Under these conditions, the theory predicts that a higher number of healthcare providers should result in more health expenditures [6].
Nevertheless, there are other explanations for the potential connection between a larger number of physicians and higher health expenditures. For example, the correlation between more doctors and higher health costs could be caused by a pre-existing unsatisfied demand for healthcare services and a higher number of doctors might reduce access costs for patients. Furthermore, causality could be reversed as newly admitted physicians select themselves into regions with already high levels of demand [31]. Researchers have referred to the argument that patients rather than doctors drive health expenditures as supply-sensitive care. This approach holds that the more services are available the more patients will consume them, especially if they suffer from chronic diseases. In this scenario, patients rather than doctors drive service usage and thus healthcare costs [7, 8].
Empirical evidence has supported the correlation between higher numbers of healthcare providers and health expenditures and have shown that there is an effect on income for doctors. Nevertheless, the above-discussed alternative explanations cannot be completely excluded [31]. Consequently, this literature has implications for how the moratorium on doctors’ admissions should impact healthcare costs: research on supplier-induced demand implies that the reduction of practitioners through a moratorium should not decrease (or might even increase) healthcare costs as fewer doctors will exploit their market position and extend services. The reform might then drive healthcare costs. According to this logic, the policy would have the opposite effect as intended. Contrariwise, scholarship on supply-sensitive care implies that the reduction of supply through fewer providers should diminish health costs because patients consume less services. Nevertheless, it is important to note that we do not aim at engaging in a causal analysis of specific hypotheses, but we start from these broad expectations to set up a descriptive analysis.
Doctors’ admissions and cost containment in Switzerland
This study focuses on Switzerland. The Swiss health system is organized in a decentralized fashion [32]. Historically, the organization of public health and prevention as well as the regulation, financing and provision of healthcare were a cantonal responsibility and the transfer of competencies to the federal government happened gradually [18]. In 1996, the Swiss health insurance law (KVG) entered into force, regulating the market for private health insurers and creating a unified health insurance, including an obligation for every resident to have a health insurance. One of the initial goals of the reform was to get the rising health expenditures under control [33]. In Switzerland, every resident must have a basic health insurance; insurers must accept everyone in their basic health insurance plan regardless of pre-existing conditions. This insurance covers inpatient and outpatient care as well as prescription drugs. Patients can choose different plans, as they are free to select healthcare providers (free selection of doctors, family doctor model, health centre model (HMO), Telmed model). Over the last decades, managed care plans (health insurance plans that reduce to some extent the freedom of choice for patients) have become the most important health insurance plan [34]. In addition, individuals need to pick a yearly amount of out-of-pocket payments for their health insurance plan deductibles (up to CHF 2 500 per year). Patients have to pay co-payments that amount up to 10 percent of the treatment cost, within a limit of CHF 700 per year. Furthermore, patients have to pay 20 percent in co-payments on medication as well as CHF 15 per day for hospital visits [34].
In the Swiss health system, prices for services are fixed. Ambulatory healthcare services are paid for by the tariff system for ambulatory care whereas care in hospitals is reimbursed through a different payment system (SWISS DRG). Doctors are self-employed and use TARMED to bill the services they provide in their ambulatory practice. In addition, doctors – especially if they have a specialist qualification – can also practice in hospitals. Insurers and providers negotiate prices in the TARMED system. Since 2013, the federal government can adjust the prices in TARMED if health insurers and doctors fail to adjust prices [34]. The federal government has conducted such adjustments in 2014 and 2017 [35]. Outpatient care is paid for through contributions from health insurers whereas cantons and health insurers share the cost for inpatient care. To govern ambulatory care, cantons can adjust the number of providers [34].
Since the introduction of the KVG by the Federal Assembly [36], healthcare expenditures in Switzerland have more than doubled. The Federal Statistical Office reports that the total cost increased from CHF 39.1 bn. in 1996 to CHF 80.5 bn. in 2016 representing an annual increase of approximately 4%. Swiss health expenditures are the highest in Europe, both in absolute terms per person (and purchasing power parity) and as a percentage of GDP [21]. This context has yielded an intense political and scholarly debate on the burden of these costs for households. Many factors influence the growth of health expenditures [37]. For example, spending has increased due to the decentralization of skills and financing [30], regional differences in health good consumption patterns [20, 38–40], the size of the economy [41], unemployment [42], and population aging [30]. Regarding the above-mentioned theoretical background, scholars have pointed out that Switzerland potentially faces a problem of a supplier-induced demand, as doctors can impact the quantity of healthcare services [29, 30].
To deal with this problem, the Swiss Parliament decided to tackle increasing health expenditures by reducing the density of service providers [43]. Precisely, the parliament introduced paragraph 55a in the KVG, which allows the Swiss government (Federal Council) to regulate providers. This policy change anticipated that the bilateral agreements between Switzerland and the European Union (EU) would result in an augmentation of health expenditures, because economic conditions in Switzerland attract doctors from other EU countries [44]. The Federal Council used the regulation for the first time in July 2002.
In 2007, the Parliament created a moratorium reducing admissions of new doctors [43, 45]. The moratorium distinguished between SP and GP because specialists created much higher health costs [26, 46] and were thus the main target of the policy. Nevertheless, the 26 Swiss cantons are responsible for implementing doctors’ admissions and managing the installation of practitioners in their region [47]. The national moratorium expired on 1st January 2010 for GP and two years later in January 2012 for SP (Fig. 1). In 2013, the Swiss Parliament reintroduced the moratorium [48] due to a sharp increase in the number of doctors, but refused to create a nationwide regulation [49, 50]. Cantons are free to choose whether they implement new rules. Eighteen cantons have reintroduced a moratorium for SP [45]. The federal government defines the main guidelines while the management of admissions is entrusted to the cantons, which follow general principles without distinguishing between national and foreign doctors [48]. Doctors who have worked at a recognized Swiss medical postgraduate institution, for at least three years, are exempted from the moratorium.
The deregulation and re-regulation of doctors’ admissions in Switzerland provide an interesting case study to assess the impact of regulating healthcare providers through a moratorium on the admission of doctors. In the following, we are especially interested in the net effect of these policy changes on the number of doctors and the direct health costs created by these individual practitioners. The combination of deregulation and re-regulation events as well as the Swiss setting with 26 comparable cantonal health systems, which vary in their application of a moratorium, are an interesting case to test the impact of this regulation. Furthermore, the policy is interesting because it affected the migration of professionals to Switzerland. In particular, the removal of the admission ban for SP has increased the immigration of doctors from neighboring countries, whereas the reintroduction of the ban diminished the influx of practitioners [51].
The background of the Swiss case also allows us to study whether there might be some evidence for supplier-induced demand. The population is fully insured, doctors are self-employed and the tariff system TARMED allows them to augment their income through increasing the amount of services provided. Furthermore, doctors can carry out their activities in different practices as well as in hospitals, which allows them to augment their income by providing more services [33, 34]. This corroborates previous research which demonstrated that cantons with a higher number of healthcare practitioners increases the per capita usage of healthcare services and drugs [39].